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Visa Earnings: Growth Holds Steady

After Visa’s ups and downs during the pandemic and recovery, we think it has settled into a more normalized groove.

Visa credit card
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Visa Inc Class A

Key Morningstar Metrics for Visa

What We Thought of Visa’s Earnings

The results for Visa’s V fiscal second quarter showed the company holding steady. Following the company’s ups and downs during the covid-19 pandemic and subsequent recovery, we think it has settled into a more normalized groove. We believe this recent performance highlights the long-term secular tailwinds that will continue to drive solid growth over the long run. In our view, the combination of Visa’s wide moat and its long growth runway creates an attractive backdrop. We will maintain our $260 fair value estimate and see shares as fairly valued.

Net revenue was up 10% year over year, roughly in line with the past couple of quarters. Payments volume increased 8% year over year on a constant-currency basis, almost exactly even with the last quarter. Macroeconomic conditions are likely the biggest swing factor in the near term, but Visa appears to be on a steady course.

Cross-border volume (the most volatile area over the past few years) also signals increased stability. Constant-currency cross-border volume excluding intra-Europe transactions (priced similarly to domestic transactions) grew 16% year over year, in line with the last quarter. While growth in this area is still healthy and a bit above our long-term expectations, the recovery in cross-border volume increasingly looks to have already been realized.

Adjusted operating margins (on a net revenue basis) fell slightly to 67.3% from 67.7% last year, and management maintained its guidance of low-double-digit expense growth for the full year. On the plus side, client incentives increased only 13% year over year, reducing margin pressure on a gross revenue basis, although this is likely mainly due to the timing of new deals.

Visa Stock vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Horn

Senior Equity Analyst
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Brett Horn, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers insurers and credit bureaus. He also oversees the equity research team’s stewardship rating methodology.

Before joining Morningstar in 2006, Horn worked in the banking industry for about a decade, most recently as a commercial loan officer for First Bank, where he was responsible for underwriting loans and managing relationships with middle market clients. Before that, Horn worked for Mizuho Corporate Bank, where he managed loan portfolios and client relationships, primarily with Fortune 500 companies.

Horn holds a bachelor’s degree in business administration, with a concentration in finance, from the University of Wisconsin and a master’s degree in business administration from the University of Illinois. He also holds the Chartered Financial Analyst® designation. He ranked first in the business and industrial services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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